Cash Flow Analysis Flashcards
7 cards from real ASC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cash Flow Analysis flashcards as text
An Argus model for an industrial property shows 'Base Rent' growing at 3% annually under market rent assumptions. If a tenant's lease contains a fixed rent escalation of 2%, what rental income does Argus project for that tenant?
Answer: 2% growth following the contractual lease schedule
During an active lease term, Argus applies the lease's contractual escalation; market rent growth only applies when projecting rents for new leases upon rollover.
Which Argus Enterprise output report best shows the year-by-year breakdown of all revenue, expense, and cash flow line items for a 10-year hold?
Answer: Cash Flow Detail Report
The Cash Flow Detail Report presents a columnar multi-year pro forma with each revenue and expense category itemized for every year of the projection period.
A property with $1,000,000 NOI is acquired with a $750,000 annual debt service. What is the Debt Service Coverage Ratio (DSCR), and what does it indicate about cash flow safety?
Answer: 1.33x — the property generates 33% more income than needed to cover debt
DSCR of 1.33x ($1,000,000 / $750,000) means NOI exceeds debt service by 33%, providing a meaningful safety cushion before cash flow turns negative.
In Argus, tenant improvement (TI) allowances are modeled as a cash flow item that appears in which section of the pro forma?
Answer: Capital Expenditures / Leasing Costs
TI allowances are leasing costs classified as capital expenditures, appearing below NOI in the cash flow and reducing the property's net cash flow available for distribution or debt service.
When a sale-leaseback transaction is modeled in Argus, the seller-tenant's new lease would typically be structured as which lease type to preserve the buyer's net cash flow predictability?
Answer: Net or absolute NNN lease with tenant responsible for all costs
Sale-leaseback transactions typically use absolute NNN or long-term net leases so the buyer-landlord receives a predictable net income stream without operating expense risk.
In an Argus cash flow, 'Effective Gross Revenue' (EGR) is calculated as:
Answer: Potential Gross Revenue minus Vacancy & Credit Loss plus Other Income
EGR equals Potential Gross Revenue (all rents at full occupancy) minus Vacancy & Credit Loss plus Other Income such as parking, storage, and antenna revenue.
A sensitivity table in Argus shows IRR results varying by exit cap rate and rent growth. If exit cap rate increases from 5.5% to 6.5%, holding rent growth constant, the expected effect on IRR is:
Answer: IRR decreases because the reversion value is lower at a higher cap rate
A higher exit cap rate reduces the terminal value (NOI / cap rate), producing a lower sale price and therefore a lower IRR for the investor.